The Impact of Oil Price Fluctuations on Saudi Arabia Stock Market: A Vector Error-Correction Model Analysis

Nouf Bin Ayyaf Al-Mogren


This paper examine the relationship between oil prices and the Saudi Stock Market by testing the null hypothesis that oil prices are statistically significant predictors of the Saudi stock market’s movements for the period 2000-2019. Finding the time series to be cointegrated, the paper performs the testing procedure by employing a Vector Error Correction Model (VECM) and results obtained indicate that oil prices are not statistically significant predictors of Saudi stock market movements, thus giving us reason to reject our null hypothesis. We also find evidence that the New York Stock Exchange NYSE is a better predictor of both the Saudi stock index and oil price fluctuations, paving the way for further research into these correlations in the future.

Keywords: Oil price, stock exchange, Vector Error Correction Model, Saudi Arabia

JEL Classifications: E44, G12, G15, C32


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